Gunnlaugsson initially refused to bow to public pressure to resign, even as tens of thousands of Icelanders rallied in the streets against his use of an offshore tax haven. (Photo: Reuters)

In the first instance of a prominent politician taken down by the 11.5 million documents leaked in the Panama Papers, Iceland Prime Minister Sigmundur Davíð Gunnlaugsson resigned on Tuesday after fully 10 percent of Iceland's population rallied in protest of his wife's secret, offshore shell company holding millions.

Gunnlaugsson was asked about the account on the day the leak was announced in a television interview, and he walked out rather than answer the question:

The next day, "an estimated 22,000 Icelanders slung eggs and protested outside the Parliament building" demanding his resignation, as Common Dreams reported. Gunnlaugsson initially refused to bow to the public pressure, but eventually announced his resignation on Tuesday evening.

The New York Times described the nature of the scandal, and why it was so galling to Icelanders in particular that their prime minister was hiding cash offshore:

Mr. Gunnlaugsson had insisted on staying in office after the leaked documents revealed that he and his wealthy partner, now his wife, had set up a company in 2007 in the British Virgin Islands through the law firm, Mossack Fonseca. The documents also suggested that he sold his half of the company to her for $1, on the last day of 2009, just before the implementation of a new law that would have required him as a member of Parliament to declare his ownership as a conflict of interest.

Mr. Gunnlaugsson had said that the leak contained no news, adding that he and his wife, Anna Sigurlaug Palsdottir, had not hidden their assets or avoided paying taxes.

But the company, Wintris Inc., lost millions of dollars as a result of the 2008 financial crash, which crippled Iceland, and the company is claiming about $4.2 million from three failed Icelandic banks. As prime minister since 2013, Mr. Gunnlaugsson was involved in reaching a deal for the banks’ claimants, so he is now being accused of a conflict of interest.

"The agriculture and fisheries minister, Sigurður Ingi Jóhannsson, told state broadcaster RUV that Gunnlaugsson was resigning as prime minister and that he would be replacing him," the Guardian reported.

Critics were not satisfied. On Twitter, people condemned the fact that the new prime minister (along with other parliament members) also possessed a secret offshore corporation, and that Gunnlaugsson will still remain his party's leader:

Finance Minister also had an offshore company in a tax haven. He does not intend to resign because of the revelations #Panamapapers

News editor of the Reykjavík Grapevine Paul Fontaine said Tuesday, "While the Prime Minister's particular role in the Panama Papers leak is huge, and I don't want to downplay it, I also don't want to downplay the involvement other Icelanders—and the countless others around the world—also had in this."

"This extends beyond the prime minister; it reaches parliament, it reaches Reykjavík City Hall, and it reportedly reaches hundreds of as yet unnamed Icelandic businesspeople," Fontaine pointed out. "The greater crime, which the Panama Papers illustrate comprehensively, is that we have a secret economy connected to and even supporting some of the worst aspects of the global capitalist system."

Future Fallout Looms

Many observers predict that further prominent recriminations will come as leaders around the world find themselves implicated in the shady dealings documented by the leak.

Indeed, U.K. Prime Minister David Cameron is currently defending himself from calls for an investigation after the leaked documents showed his deceased father held an undisclosed offshore company.

"It's a private matter in so far as it's a privately held interest, but it's not a private matter if tax has not been paid," Corbyn argued. "So an investigation must take place. An independent investigation."

The Guardian reported on the Cameron family's tax havens as far back as 2012, noting that Cameron's father "ran a network of offshore investment funds to help build the family fortune that paid for the prime minister's inheritance."

Meanwhile, Ukraine's president faces possible impeachment proceedings for his offshore holdings in the British Virgin Islands, and the Chilean head of anti-corruption group Transparency International resigned Tuesday after the Panama Papers revealed his own use of secret shell companies.

Where's the U.S. in all this?

Relatively few Americans have been named in the leak thus far, perhaps pointing to the country's status as one of the foremost locales for creating shell corporations like those documented in the Panama Papers. "Americans can form shell companies right in Wyoming, Delaware or Nevada," said Shima Baradaran Baughman, a law professor at the University of Utah, in an interview with Fusion. "They have no need to go to Panama to form a shell company to use for illicit activities."

"The U.S. is becoming one of the world’s foremost tax havens."—David Dayen

David Dayen explored in depth the paltry U.S. regulations around onshore shell companies in Salon: "While we force foreign financial institutions to give up information on accounts held by U.S. taxpayers through the Foreign Account Tax Compliance Act of 2010, we don’t reciprocate by complying with international disclosure requirements standardized by the Organization for Economic Co-Operation and Development (OECD) and agreed to by 97 other nations. As a result, the U.S. is becoming one of the world’s foremost tax havens."

President Barack Obama addressed the Panama Papers leak for the first time on Tuesday, condemning the laws that make offshore tax havens legal.

But those words rang hollow to many observers who recalled that the Obama Administration was behind the very trade deal, Panama TPA, that enshrined the rights of firms such as Mossack Fonseca to funnel millions into untraceable offshore shell companies.

As Common Dreams noted, "Much of [Mossack Fonseca's] activities were not necessarily illegal—thanks to agreements such as the Panama TPA." It is worth noting that Bernie Sanders advocated against the deal.

The Clintons' Shell Game

Reform also seems unlikely should Hillary Clinton become the Democratic party's nominee, considering that she and her husband own a shell corporation such as the ones documented in the Panama Papers, as the Associated Pressreported last year. Unnamed officials told the AP that "the entity was a 'pass-through' company designed to channel payments to the former president."

Thanks to the nature of the laws surrounding such corporations, Clinton is not required to disclose the company's existence or earnings in her campaign finance reports.

Still, observers are hopeful that this record-shattering leak will drum up enough public pressure to not only topple prominent politicians, but to also propel the efforts of groups seeking real legislative reform.

"The Panama Papers are a boost to the global movement to stop tax-haven abuse and recapture trillions of the hidden wealth of nations," wrote author Chuck Collins in TheNation. "This story isn’t going away anytime soon."

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Further

On this day 50 years ago, a platoon of U.S. soldiers entered the hamlet of My Lai in South Vietnam and, in hours, massacred 504 unarmed women, children and old men. Over 300 of the victims were younger than 12; the G.I.s also raped many of the women and burned all the homes. Today, with torturers and warmongers on the rise, the horrors of My Lai serve as a grim warning. In America's wars of choice, says one vet, we are all "one step away from My Lai."